Hewlett-Packard (HPQ) has introduced two new computer server products under the Apollo brand — Apollo 6000 and Apollo 8000 — that are already available for order.
H-P’s Apollo 8000 can stack 144 servers per rack and is the world’s first completely water cooled supercomputer. It is worth noting that Apollo 8000 will help H-P to compete with International Business Machines (IBM) in the high end supercomputing segment. Apart from being space efficient, Apollo 8000 is more energy efficient as it is water cooled.
Although the liquid-cooled supercomputers are more energy efficient, the adoption rate is slow due to the risk of component damages due to leakage. H-P has come up with a revolutionary design to circulate water in the blades through copper pipes and a vacuum inside the copper pipe to avert leakages.
H-P’s air-cooled Apollo 6000, on the other hand, can stack up to 160 low-end servers in one rack thus providing high performance computing capabilities while using less energy than the products currently available. This ultimately lowers operational expenses for its users.
We believe that these product launches will enable that company to maintain its leadership position in the server market. H-P was the number one vendor in the server market in the first quarter of 2014, per IDC’s Worldwide Quarterly Server Tracker. H-P secured the top spot in 2013 as well, both in terms of revenues and market share.
Although H-P’s first-quarter revenues from servers were down 2% on a year-over-year basis, the company held on to its 26.5% market share, flat year over year.
H-P’s server revenues were impacted by continued decline in Itanium-based Integrity server revenues which more than offset higher revenues from x86-based ProLiant servers. H-P retained its leading position in x86 servers and Blade servers commanding a 29.6% and 43.7% revenue share in the first quarter of 2014, respectively.
Reportedly, H-P is taking aggressive steps to increase its share in the x86 server segment since IBM sold its x86 server business to Lenovo. The sale of IBM’s x86 server business has created an opportunity for H-P, which is tapping into the current IBM customer base. This should strengthen its footing in the server market and generate incremental revenues, going forward.
Moreover, H-P’s traction in the cloud, security and big data segments are expected to be the growth catalysts, going forward. We believe that the company’s strategic focus on the software business will help it to diversify beyond PCs.
It’s probable entry into the 3D printing market should be another growth catalyst given the rapid adoption of 3D technology across industries. Nonetheless, macroeconomic challenges and tepid IT spending remain the near-term concerns.
Currently, H-P has a Zacks Rank #3 (Hold). Investors may consider other better-ranked stocks like Micron Technology (MU) and Juniper Networks (JNPR). While Micron sports a Zacks Rank #1 (Strong Buy), Juniper has a Zacks Rank #2 (Buy).